Individual annualized premium equivalent (APE) for the private sector was muted at 3% year-on-year (y-o-y) in December 2020 (base was a bit high), higher than 7.1% y-o-y decline in November but lower than 14% growth in October 2020. Overall APE growth was a tad higher at 5% y-o-y due to strong 60% y-o-y growth in group APE indicating likely pick up in credit protect business (disbursements by financial institutions were strong during the month).

Overall growth in individual APE for the private sector was muted at 3% y-o-y in Q3FY21 (16% y-o-y in Q3FY20) despite robust 14% y-o-y growth in October 2020. It however remains higher than the 3% y-o-y decline in Q2FY21. LIC was down 22% y-o-y in Q3FY21 on a high base of 40% y-o-y in Q3FY20. While growth has improved from trough levels, protection business has slowed down likely due to moderation from heightened risk aversion. Unit-linked insurance plans (Ulips) have picked up a bit from trough levels, likely tracking the buoyant equity market. Traditional business segments and protection, however, continued to remain key drivers for incremental volumes in Q3FY21, in our view. We expect growth to pick up in Q4FY21E on a low base of March 2020 (due to the sudden lockdown).

Individual sum assured weak
Individual sum assured for the private sector declined 14% y-o-y in December 2020 (down 17% y-o-y in November 2020 and 9% y-o-y in 3QFY21) compared to 9% y-o-y growth in October 2020 and 8% y-o-y growth in H1FY21. This is likely following recent tariff hikes by large players and lower risk aversion among consumers driving slowdown in retail protection.

Individual non-single sum assured to individual non-single premium declined to 26X in Q3FY21 from 29X in Q3FY20 and 35X in Q2FY21 reflecting a sharp slowdown in individual protection. Sum assured in the group single segment was up 13% y-o-y in December 2020 (up 11% y-o-y in Q3FY21 compared to 46% y-o-y decline in H1FY21) likely reflecting pick up in credit protect business.

Q3FY21E forecast
Large private life insurers (excluding ICICI Prudential Life) reported 5-22% y-o-y increase in APE in 3QFY21; ICICI Prudential Life’s APE is down 21% y-o-y.

Growth in the protection segment has likely moderated from peak levels observed in H1FY21, reducing their contribution to quarterly APE and value of new business.Ulip growth, a low margin business, was the likely volume driver.

Edited extracts from Kotak Institutional Equities Research report